The ECB has plunged into European bond markets, forcing down Italian and Spanish borrowing costs, but many believe the bond-buying remains far too small to significantly calm the markets.

Meanwhile, discussions continue about using the IMF in some way to allow Europe to funnel further money into the system to calm the crisis.

The ECB is now allowed to directly fund the debts of countries, a process it calls monetary financing.

Spanish and Italian bond yields dropped as the ECB purchased the debts of Italy and Spain for a fifth day running. Italy's effective interest rate -- on 10-year money -- dropped to 6.63pc, while for the same maturities Spain's borrowing costs dropped to 6.38pc.

Key market players like Larry Fink of Blackrock, the biggest money manager in the world, and Bill Gross of Pimco, the biggest bond fund in the world, said there was no sign the crisis was easing.

However, Mr Fink said the Germans extracted major concessions, even if they were playing a "dangerous" game by allowing so much market distress to continue.

Meanwhile the head of the Bundesbank, Jens Widemann, said Germany must hold the line against full-scale bond buying by the ECB, a position backed for now by ECB president Mario Draghi.

Finance Minister Elena Salgado said Spain wanted the ECB to continue buying bonds "powerfully" to ease tensions in financial markets even as she said the nation's debt is sustainable.

Spanish Prime Minister Jose Luis Rodriguez Zapatero said this week that the European Commission and ECB should act "immediately" to stem the crisis. The ECB would quickly lose credibility if it departed from its primary role of keeping prices stable, ECB President Mario Draghi said in a speech in Frankfurt.

Agreement on the ECB-IMF proposal may result in an announcement at a European Union summit on December 9, Dow Jones reported yesterday.

Meanwhile, in a bid to improve eurozone economic governance and calm market concerns about the sustainability of the single currency project, the European Union executive arm will propose two regulations to strengthen eurozone economic governance.

It will also present a study of three options for joint debt issuance of the 17 countries sharing the euro, but without any conclusions or suggestions as to which one to choose.

The first new law that the Commission wants would link the possibility of getting emergency loans from the eurozone bailout funds, current and future, to accepting prior close monitoring of the economy by the Commission.

The official said the monitoring would be even more extensive than for Greece, Portugal and Ireland -- countries under eurozone bailout programmes.

"If a member state is put under this enhanced surveillance, because of the risk of having to ask for a (bailout) programme, then yes, then it would mean an almost permanent presence of the Commission there," the official said.

The assumption is that no country would refuse accepting such monitoring because otherwise it would not be eligible for help from the bailout fund -- the European Financial Stability Facility, which will become the European Stability Mechanism from mid-2013.

The second regulation would give the Commission a right to scrutinise draft budgets of eurozone countries, make suggestions of changes, or even ask for a new budget draft if the submitted one does not meet earlier agreed criteria.

The Commission would assess the eurozone budget drafts, to be submitted by mid-October, according to country-specific recommendations agreed on by EU leaders in June.

"The Commission would have the right to issue opinions or even ask for a new budget," the official said.